Student loan debt is crippling many people’s lives in the U.S, and while we’re all crossing our fingers, Uncle Joe Biden (U.S President) might have some last-minute student debt forgiveness scheme in the works. Praying for a miracle is probably not the best strategy.
How to Pay Off Student Loan Faster?
So, in this article, We’re going to share tangible, real actions you can take to help you reduce your student loan debt faster. Because the truth is, many of us would like to ignore the issue, pay our minimums, and hold our breath until it’s all over. But this isn’t dinner with your weird co-worker; this is your financial future! And it is time to take off your blinders and face this monster head-on. Are you ready?
Paying Off Student Loans Faster
The best way to pay off student loans is to pay your monthly payments consistently, right? But what is not as obvious is that the longer it takes you to pay off your student loans, the more it will cost you. A $30,000 student loan at 6% interest over ten years has $333 monthly payments. And while some of the money will go toward your student loan debt, almost $10,000 goes to interest.
What’s interesting is that the amount of money going towards interest changes from year to year. Because when a bank loans money, they take more interest at the beginning than at the end. So if you pay $333 a month in the first year, almost half of it goes to interest. Not to mention that you have to pay for this for ten years! You’ll have to pay $333 monthly for the next ten years of your life.
How Can You Pay Off Student Loans Faster?
There are many ways to pay off student loans faster, but we think the following four actions can help you get rid of your student loans even faster.
#1: Deal With Your Reality And Understand Your Loan
A lot of us avoid talking about student loans or try to forget that we even have them. But the reality is that you need to deal with them as soon as you leave school and not wait until your grace period is over. Paying off your student loans as soon as possible is best. We know it’s easier said than done, but facing reality is the first step to paying back your loans. Be aware of the terms and conditions of your loan, and know your responsibilities.
Have you heard about people who paid off their Tens or Hundreds of Thousands of Dollars in student loan debt in just a couple of years? It wasn’t a fluke. They had goals from the beginning and stuck to them until they paid the last cent. Use goals to inspire your debt payment journey!
Tell someone about your goal, like your best friends or your parents, so that you build accountability. They might even have tips on “how to pay off student loans faster. And as you make your plans, look carefully at your current finances and figure out how much you make and spend each month. It will help you determine how much you can put towards your monthly debt.
#2: Pay More Toward Your Principal
As We’ve already mentioned, “your interest changes every year.” So, if you have to pay back $333 in student loans each month, almost half of that goes to interest. The best way to pay off student loans faster is to put extra money towards the principal as soon as possible.
The sooner you do this; the more money goes towards your loan balance. And the less you’ll have to pay on interest. Instead of $333 per month, put an extra $100 toward paying off your balance. That reduces the amount you pay on interest by over $3,000 and cuts four years off your loan, paying it in just six years!
#3: Re-Focus Other Loan Spending
The third action you can take to Pay off Student Loans Faster is Re-Focus another loan spending, i.e., Cars or expenses towards your loan principal. People who have just gotten their first job tend to spend money on clothes, phones, cars, and even houses. It is called “Lifestyle Inflation,” a bad habit. When your income increases, you compensate by spending more on your lifestyle.
It starts with doing nice things for yourself, like taking Uber to work instead of the bus, eating out instead of packing your lunch, getting your nails done, and replacing your warrant but still usable furniture. Then when it’s time to pay loans, you only pay the minimum. Or worse, you take out more loans, which increase over time. If you want to avoid this way of living, think of yourself as still being a broke college student. We promise you’ll pay off student loans much faster. Keep your eye on the prize until you’re debt-free.
#4: Start A Side Hustle
Most people will tell you to work harder at your job, but there’s a limit to how much money you can earn when trading your time for money. And if you don’t work, you don’t get paid. Starting a side hustle is a great way to pay those student loans even faster.
And the great thing about this generation is that you have more opportunities than ever. You can become an online freelancer with skills like Writing, Graphic Design, Making Music, or Editing Videos. You could start a YouTube channel or a podcast if you have a passion. Or you can even start your own business.
Of course, these things take more time and work, but they will pay off in the long run. It’s not easy, but it is worth it.
The beginning of the journey is always the hardest. You must build momentum, get yourself going, and figure out how to take each step. With a student loan payment plan, that is the case. But know that, as tough as it might be in the beginning, with perseverance and commitment towards these consistent actions, you’ll soon be debt-free, and it will lift a huge weight off your shoulders.